OMGT 3123 CHAPTER 7 EXAM
QUESTIONS AND ANSWERS
1) For the average manufacturer, over 50 percent of the value of shipments comes from
materials. - Correct Answers -True
2) Company A spends $250 million purchasing materials and subassemblies that it
processes and sells for a total of $350 million. The cost of goods sold by Company A is
$350 million. - Correct Answers -False
3) The ratio of earnings to sales for a given time period is a firm's profit margin. - Correct
Answers -True
4) The first step of the purchasing process is to select the supplier. - Correct Answers -
Fa;se
5) Maverick spending is often promoted by top management as a way to improve the
bottom line and break out of a purchasing cycle. - Correct Answers -False
6) Outsourcing can be risky because it decreases the firm's strategic flexibility. - Correct
Answers -False
7) Total cost analysis divides costs into direct (costs that are tied to the level of
operations or supply chain activities) and indirect (costs that are not tied to the level of
operations or supply chain activity). - Correct Answers -True
8) Portfolio analysis begins with assignment to a quadrant before a sourcing strategy is
formulated. - Correct Answers -True
9) A company that uses portfolio analysis would probably classify things like office
supplies in the Bottleneck quadrant. - Correct Answers -False
10) A manufacturer seeking to reduce the variability of quality should use multiple
sourcing. - Correct Answers -False
11) A manufacturer that wants to make sure that suppliers do not become complacent
should use multiple sourcing. - Correct Answers -True
12) Cross sourcing is a strategy in which two suppliers are used for the same
purchased product or service. - Correct Answers -False
, The weighted-point evaluation system allows for a completely objective decision to be
made. - Correct Answers -False
14) The request for quotation is a formal request for suppliers to deliver a product or
service that includes key terms and conditions, such as price, delivery, and quality
requirements. - Correct Answers -False
15) In the description activity of the purchasing process, the product should be
described only by brand or specification. - Correct Answers -False
16) When a preferred supplier does not exist, competitive bidding and negotiation are
two methods commonly used for final supplier selection. - Correct Answers -True
17) In a cost-based contract, the stated price does not change, regardless of
fluctuations in the general overall economic conditions. - Correct Answers -False
18) Use of EDI in the supply chain has led to shorter lead times and lower inventory. -
Correct Answers -True
19) Money is automatically drawn from the buyer's account and deposited into the
supplier's account in an electronic funds transfer (EFT). - Correct Answers -True
20) A recent trend in supply management is a move towards a more sustainable supply
chain. - Correct Answers -False
1) Firms do not compete only against global competitors, but against:
A) their suppliers.
B) themselves.
C) the customers of their competitors.
D) their competitors' supply chains. - Correct Answers -D) their competitors' supply
chains.
2) The percentage of value of shipments that come from materials for the average
manufacturer is:
A) greater than or equal to 40 and less than or equal to 49 percent.
B) greater than or equal to 50 and less than or equal to 59 percent.
C) greater than or equal to 60 and less than or equal to 69 percent.
D) greater than or equal to 70 percent. - Correct Answers -B) greater than or equal to 50
and less than or equal to 59 percent.
13) The ratio of earnings to sales for a given time period is the:
A) cost of goods sold.
B) merchandise inventory.
C) profit margin.
D) return on assets. - Correct Answers -C) profit margin.
QUESTIONS AND ANSWERS
1) For the average manufacturer, over 50 percent of the value of shipments comes from
materials. - Correct Answers -True
2) Company A spends $250 million purchasing materials and subassemblies that it
processes and sells for a total of $350 million. The cost of goods sold by Company A is
$350 million. - Correct Answers -False
3) The ratio of earnings to sales for a given time period is a firm's profit margin. - Correct
Answers -True
4) The first step of the purchasing process is to select the supplier. - Correct Answers -
Fa;se
5) Maverick spending is often promoted by top management as a way to improve the
bottom line and break out of a purchasing cycle. - Correct Answers -False
6) Outsourcing can be risky because it decreases the firm's strategic flexibility. - Correct
Answers -False
7) Total cost analysis divides costs into direct (costs that are tied to the level of
operations or supply chain activities) and indirect (costs that are not tied to the level of
operations or supply chain activity). - Correct Answers -True
8) Portfolio analysis begins with assignment to a quadrant before a sourcing strategy is
formulated. - Correct Answers -True
9) A company that uses portfolio analysis would probably classify things like office
supplies in the Bottleneck quadrant. - Correct Answers -False
10) A manufacturer seeking to reduce the variability of quality should use multiple
sourcing. - Correct Answers -False
11) A manufacturer that wants to make sure that suppliers do not become complacent
should use multiple sourcing. - Correct Answers -True
12) Cross sourcing is a strategy in which two suppliers are used for the same
purchased product or service. - Correct Answers -False
, The weighted-point evaluation system allows for a completely objective decision to be
made. - Correct Answers -False
14) The request for quotation is a formal request for suppliers to deliver a product or
service that includes key terms and conditions, such as price, delivery, and quality
requirements. - Correct Answers -False
15) In the description activity of the purchasing process, the product should be
described only by brand or specification. - Correct Answers -False
16) When a preferred supplier does not exist, competitive bidding and negotiation are
two methods commonly used for final supplier selection. - Correct Answers -True
17) In a cost-based contract, the stated price does not change, regardless of
fluctuations in the general overall economic conditions. - Correct Answers -False
18) Use of EDI in the supply chain has led to shorter lead times and lower inventory. -
Correct Answers -True
19) Money is automatically drawn from the buyer's account and deposited into the
supplier's account in an electronic funds transfer (EFT). - Correct Answers -True
20) A recent trend in supply management is a move towards a more sustainable supply
chain. - Correct Answers -False
1) Firms do not compete only against global competitors, but against:
A) their suppliers.
B) themselves.
C) the customers of their competitors.
D) their competitors' supply chains. - Correct Answers -D) their competitors' supply
chains.
2) The percentage of value of shipments that come from materials for the average
manufacturer is:
A) greater than or equal to 40 and less than or equal to 49 percent.
B) greater than or equal to 50 and less than or equal to 59 percent.
C) greater than or equal to 60 and less than or equal to 69 percent.
D) greater than or equal to 70 percent. - Correct Answers -B) greater than or equal to 50
and less than or equal to 59 percent.
13) The ratio of earnings to sales for a given time period is the:
A) cost of goods sold.
B) merchandise inventory.
C) profit margin.
D) return on assets. - Correct Answers -C) profit margin.
